Economic liberalization, economic growth, and environmental quality in Nigeria (1970-2012)
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Date
2014
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Economics,Obafemi Awolowo University
Abstract
This study investigated the trend in economic liberalization, economic growth, and environmental quality; and appraised environmental policies in Nigeria. The study also examined the validity of Pollution Haven Hypothesis (PHH) and Environmental Kuznets Curve (EKC) in Nigeria with a view to establishing the dynamic inter-relationship among economic liberalization, economic growth, and environmental quality over the period 1970 to 2012.
The study used secondary data. Annual data on real Gross Domestic Product per capita (GDPC), Foreign Direct Investment (FDI), trade intensity, carbon dioxide (CO2) emissions, energy use, financial development, indirect tax, exports, and imports were sourced from the Statistical Bulletin of the Central Bank of Nigeria, the Carbon Dioxide Information Analysis Centre, and World Development Indicators of the World Bank. The data were analyzed with descriptive statistics and econometric techniques. The econometric techniques used included dynamic ordinary least square, and Vector Error Correction Model (VECM). The results showed significant increase in the magnitude of all the series. Real GDP of Nigeria increased from N4.22 billion in 1970 to N902.79 billion in 2012. Similarly, CO2 emissions rose from 21540 kilotons to 81479 kilotons while FDI grew from N251 million to N50469.9 million. The study also found that Nigeria had enough environmental policies to tackle environmental challenges but the policies were weak to achieve the intended objectives on the environment. The study found no support for the PHH. The coefficient of environmental quality in the parsimonious PHH model was significant (t=-3.5557; p<0.05). Increase in CO2 emissions led to decrease in FDI. Conversely, improvement in environmental quality would attract more FDI. The quadratic EKC model established a negative coefficient on GDPC (t=-2.9526; p<0.05) but a positive coefficient on 〖(GDPC)〗^2: (t=2.7868; p<0.05). The results showed a U-shaped curve for Nigeria, contrary to -++cthe conceptual inverted U-shaped EKC. Similarly, the cubic EKC model showed alternating signs on the coefficients of GDPC (t=3.7248; p<0.05); (GDPC)2: (t=-1.6613; p<0.05); and (GDPC)3: (t=4.0147; p<0.05), implying an N-shaped EKC. Both the quadratic and cubic models showed that GDP growth was associated with high pollution in Nigeria.
The VECM showed that trade intensity, FDI, and GDPC significantly influenced environmental quality simultaneously both in the current and future periods. In a unidirectional way, GDPC affected both environmental quality and FDI, while FDI affected environmental quality. The impulse response function showed that an innovation in trade intensity generated negative responses on environmental quality over the entire period. The variance decomposition showed that the effect of the shock on environmental quality was greater and increased continuously over the entire period with greater effect in the long-run than the short-run.
The study concluded that FDI, trade intensity, financial development, economic growth, and environmental quality simultaneously influenced pollution levels and GDP growth in Nigeria.
Description
xxii,317p
Keywords
Trade intensity, Economic growth, Economic liberalization, Environmental quality
Citation
Posu,S.M.A (2014). Economic liberalization, economic growth, and environmental quality in Nigeria (1970-2012). Obafemi Awolowo University